Federally subsidized crop insurance indemnity payments on 2011 crops are well on their way to breaking 2008's record payouts of $8.6 billion. That's the word from Jan Eliassen, a private consultant in risk management education for USDA's Risk Management Agency and several state departments of agriculture.
One reason for the big payouts was the relatively high 2011 crop futures prices last spring. They set last year's revenue guarantees for revenue products. Indemnity payments that farmers are now receiving on 2011 crops are now making up for a lot of lost revenue.
While crop prices have retreated from highs set in August, they remain lofty. And after the 2011 historic floods and harvest losses, you may want to push a pencil on projected revenue guarantees on their 2012 crops. Remember though, there's a March 15 deadline for buying crop insurance on spring-planted crops.
A case for planting-time price protection
Some marketing experts are predicting lower prices in 2012. Suppose 2012 bumper crops let prices drift lower into harvest.
Buying insurance products that base indemnity payments on planting-time prices could be wise. Buying up to higher levels of coverage may be a strong consideration, especially for corn and soybean producers.
March 15 is also the deadline for signing up for Adjusted Gross Revenue Lite (AGR-Lite). This whole farm revenue insurance works well for those who grow multiple crops. It can be used as an umbrella policy. Premiums are prorated to account for crop insurance on insurable crops.
Premiums for AGR-Lite are roughly estimated to fall between $1.30 to $3.50 per $100 of coverage. For more information on crop insurance choices available in your area, contact a crop insurance agent well before the deadline.